Production of renewable energy but sent to the grid

Probably. The requirements would be similar to a solar garden described in the credit language. The RECs must also be retained or replaced. The owner must provide a document which allocates some or all of the power produced to this project.

Depending on the arrangement the green power portion may be satisfied. Carbon offsets would need to be purchased for an on-site fossil fuel usage.

The electrons do not have to flow directly to the building. This is mostly a paper transaction. As long as you can document the PV production and predict the building consumption while meeting the other criteria you should be able to claim it.

I have a similar situation, where my project would own the system but would like to sell all the production back to the utility, due to operational concerns of the solar panels and flickering within the project facility. Does this type of project still comply so long as they are meeting the requirement of retiring all REC's with the project?

Are you sure the utility would buy the solar power without the RECs? If they don't have the RECs they can't sell it again as green power. Technically I think this type of arrangement would qualify. 

It is unlikely that the utility would buy the solar power without RECs. I am trying to understand what would make a PPA agreement an attractive option for the project without those RECs.

If my understanding is correct, the strategy to make this agreement both financially attractive and qualify for the credit, is due to the difference between selling and purchasing RECs by the LEED project? In otherwords, if the LEED project is selling the power with RECs to the utility company at one price and then purchasing RECs from a different source at a lower price, that cost differential may result in a revenue stream or ongoing utility bill offset.

OR

Is net metering an alternative strategy to avoid "selling" the power back to the utility and thereby offsetting the consumption instead? 

Yes you can sell and then replace the RECs with cheaper ones. Depending upon the REC prices in your area this could be a significant revenue stream.

Yes you can use the power directly in the facility which offsets the consumption by sending the power to the building first and only any excess would go to the grid.

I thought I may follow up given I got some feedback from GBCI regarding the scenario of a PPA and a third-party owned system whose energy generation goes straight to the grid. GBCI referenced the guide language that states 'that "the project owner must retain all environmental benefits from the renewable energy" for third-party owned on-site systems, so repurchasing RECs to make up for ones that have been sold is generally not permitted for those systems.'

GBCI then went on to clarify that there have been project specific allowances given in the past "for projects to repurchase RECs for on-site PPAs when they are using the electricity on-site; however, when the electricity is not used on site and the RECs are sold, GBCI has determined that the credit intent is not met and this allowance (repurchasing the RECs) could not be granted."

I believe the distinquishing issues here are that the system is third-party owned, the roof would be leased out to that third party, the utility is by-passing the project completely and the REC's were not maintained. Yes the system is offsetting demand on the grid, but there is nothing associating that system or it's env attributes directly with the LEED project specifically for it to claim complaince for the credit.